The Fed is raising benchmark interest rates three-quarters of a percentage point — the largest jump since 1994 — to a range of 1.5%-1.75%. It's likely not the last increase; the rate-setting Federal Open Market Committee forecasted that rates will continue to go up in the coming months and may reach 3.8% next year.
Raising rates can help reduce inflation by increasing the cost to borrow money, which in turn slows down spending. But higher rates also mean that loans tied to the prime rate, such as mortgages, credit cards and auto loans, will be getting slightly more expensive.
While there's little to be done to avoid the rate hikes, there are two things consumers can do now to protect themselves financially.
First, now is a good time for consumers to make a concerted effort to tackle their debt if they can afford it, as well as be careful about taking on any new debt, Mark Hamrick, senior economic analyst at Bankrate, tells CNBC Make It.
"You want to focus on paying down debt and be judicious about taking on new debt, particularly when the likelihood is that it's getting more expensive," he says.
It is particularly important to pay off your credit card bill in full every month, if you can afford to, because you "do not want to take those punitive rates of interest" if you can avoid it.
Second, it is a good time to focus on saving, Hamrick says, especially if you have a high-yield account, because returns will get "slightly more generous."
"For those who have the resources, they really should be trying to focus on saving," Hamrick says. "[Our] surveys have indicated that among the No. 1 financial regrets that Americans have is a failure to save for emergencies, and high and sustained inflation might be viewed by some as akin to an emergency."